Woods ‘perplexed’ at insurer’s change of tune

EQC minister Megan Woods wants answers from the Insurance Council of New Zealand on why New Zealand’s largest insurer appears to be reducing its contents cover in Wellington, apparently contradicting a submission to Parliament made by the ICNZ last year.

ICNZ submitted on the EQC Act, which took contents cover out of EQC and left it to the private insurance market. 

Under the previous regime, EQC covered contents cover up to $20,000. As of July this year, EQC will no longer provide contents coverage but will increase the minimum level of coverage it provides to homes by $50,000 to $150,000. 

The submission from ICNZ said it supported the removal of contents cover, adding "the private insurance market will be able to cover this additional risk”.

But New Zealand’s largest insurer, IAG announced this week it was taking “a conservative approach to writing new business in Wellington due to the high earthquake risk in that part of the country”.

The insurer conceded this would mean Wellingtonians “may find they are unable to obtain cover”. 

IAG controls 46 percent of the insurance market, as the parent company of insurance brands AMI and State, and the underwriter of policies issued by a number of banks.

Woods said the decision left her “perplexed” as it was at odds with the ICNZ’s submission on the EQC Act last year.

“I’m perplexed that we have a submission that sits there and says that they had confidence that there would be a filling of this gap.” 

She said she would pick up the issue with ICNZ in the coming days.

She would not comment on whether a return to contents insurance by EQC would change IAG’s position, saying that was a question for private insurers. But a Government return to contents insurance appears unlikely. 

“The transactional costs of contents insurance for a public insurer like EQC was too high,” Woods said.

Insurance Council "unaware"

Insurance Council Chief Executive Tim Grafton told Newsroom IAG the council’s submission was consistent with what was announced by IAG. 

“There is no substantial change,” Grafton said. 

He said he had no indication from any residential home and contents insurer that they were unable or unwilling to provide contents cover in Wellington. 

“I’m not aware of any insurer that is withdrawing from contents cover,” he said.

IAG responds 

IAG held a news conference for Auckland-based media on Wednesday, saying they were not leaving the Wellington market.

A statement was then released from IAG NZ’s Executive General Manager Kevin Hughes saying the company would maintain a “conservative approach” to providing insurance in Wellington. 

“We insure around half of Wellington and following the Kaikōura earthquake we undertook a conservative approach to providing insurance in Wellington due to high natural peril risk in the area.”

Hughes said the company’s priority would be to continue offering coverage for existing customers.

It is still not known how much IAG would like to reduce its exposure in Wellington. The changes could mean IAG reducing its market share substantially or not at all. 

Prioritising existing customers could mean IAG’s market share remains roughly the same, or falls slightly as Wellington’s population grows.

But Grafton believes IAG will keep its current share of the Wellington market.

“What they have said today is that they are neither withdrawing from or reducing their coverage in the Wellington market,”  Grafton said. 

“That percentage of the market will still be covered and will still continue to be covered,” he said. 

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